Revisiting the Algorithm that Changed Horse Race Betting

This paper examines the elements necessary for a practical and successful computerized horse race handicapping and wagering system. Data requirements, handicapping model development, wagering strategy, and feasibility are addressed. A logit-based technique and a corresponding heuristic measure of improvement are described for combining a fundamental handicapping model with the public’s implied probability estimates. The author reports significant positive results in five years of actual implementation of such a system. This result can be interpreted as evidence of inefficiency in pari-mutuel racetrack wagering. This paper aims to emphasize those aspects of computer handicapping which the author has found most important in practical application of such a system.